Facebook revenue jumps 61% on mobile ad strength

Jul. 23, 2014
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Facebook logo. / Matt Rourke, AP

by Jessica Guynn, USATODAY

by Jessica Guynn, USATODAY

SAN FRANCISCO - Fueled by strong demand for mobile advertising, Facebook extended its hot streak in the second quarter, gaining on its chief competitor, Google, and positioning itself as a top player in digital advertising.

The giant social network scorched analyst estimates for the ninth straight quarter.

Facebook grew revenue 61% and more than doubled second-quarter profit while making even more money from ads targeted at users on mobile devices, sending shares to record highs in after-hours trading on Wednesday.

"Facebook is firing on all cylinders, and they are doing it in a very efficient way," JMP Securities analyst Ron Josey said. "You would be hard-pressed to find another company of this size that has grown advertising this fast."

Research firm eMarketer expects Facebook's share of the $18 billion U.S. mobile advertising market to hit 18.4% this year, up from 9% in 2012. Facebook is still a distant second to Google, but Google's share is expected to slip to 40% this year from 50% in 2012.

Analysts also see promise in a major push into premium video advertising. Facebook began rolling out the 15-second spots in March.

Another promising growth area: ads that appear on Facebook's photo-sharing service Instagram, which the company started selling in November.

Facebook also launched a mobile advertising network in April. Facebook sells ads that appear on mobile apps that Facebook does not own.

And Facebook still has the world by the tail. It says it now has 1.32 billion monthly users. That means it has more users than India has people, and it's closing in on China.

"Facebook has a lot of momentum in its advertising business, and we are going to continue to see momentum over the next few quarters and the next few years," said eMarketer analyst Debra Aho Williamson.

"Facebook has a lot of things that it is working on. It's being very cautious about Instagram and its mobile ad network, but all of these things are going to start rolling out and contributing more to Facebook's revenues," she said. "That, combined with all the work they have been doing with ad targeting, is creating a great foundation for future revenue growth."